The Macro Show Replay | February 1, 2016


Secretary Abraham: Rising Geopolitical Tensions And The Price Of Oil


In this HedgeyeTV video excerpt, former U.S. Energy Secretary Spencer Abraham from Potomac Research Group distills increasing geopolitical tensions including developments in Iran, Saudi Arabia and Russia and how it will impact oil prices. 

CHART OF THE DAY: Got Non-Sucker Alpha?

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more.


"... If you can’t be long the “growth” that everyone is already long, what was up last week that is A) actually up YTD and B) generating non-sucker alpha for the right reasons?

  1. Utilities (XLU) had another monster week, closing +3.7% to 4.9% YTD
  2. The Long Bond (TLT) capitalized on another -13 basis point drop in the 10yr Yield to get to +5.3% YTD
  3. Gold tacked on another +1.8% for the week, moving to +5.3% YTD" 

 CHART OF THE DAY: Got Non-Sucker Alpha? - 02.01.16 Chart

Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.52%
  • SHORT SIGNALS 78.67%

SPY Suckers

“If you don’t know who the sucker is, it’s you.”



Searching through this morning (nice life at 5AM), I couldn’t figure out who actually made this common sense statement first. If you know, let me know!


In one of Berkshire’s Annual Reports, Warren Buffett wrote: “As they say in poker, if you’ve been in the game 30 minutes and don’t know who the patsy is, you’re the patsy.”


I don’t like the word patsy, and I don’t want to be the sucker. What I really want is good #process. As Lasse Heje Pedersen wrote in Efficiently Inefficient, “we are interested in strategies that can be expected to continue to make money in the future – a repeatable process that generates alpha.” (pg 39)


SPY Suckers - trust my gut cartoon 10.14.2015  2


Back to the Global Macro Grind…  


Don’t be the guy/gal who woke up this morning with the “15 Stocks To Buy Now” (cover of Barron’s this weekend). Instead of how to “position for a rebound” (Barron’s), non-suckers will continue to be positioned for what’s been working for 7 months – selling into the mother of all-time highs in US stocks, and ramping up defensive Long-term Treasury type (TLT) exposures.


Last week was a fun one, if only because they found “rebalance” as a reason to mark-up the US stock market into month end after a ridiculous move by the Japanese to target “negative yields” in their bond market. After closing +2.5% on the day on Friday (to get the SP500 +1.7% on the week), most macro pundits were able to forget that US GDP had a 0% handle on it (0.7% for Q4).


If you dig into the internals of the macro market moves (we’re non-sucker sticklers for breaking down the storytelling of it all) here’s how the weekly scores looked relative to 2016 to-date:


  1. US Dollar Index flat for the week and +1.0% YTD
  2. Burning Yen (vs. USD) -1.9% for the week and -0.7% YTD
  3. Nikkei (Japan) +3.3% for the week and -8.0% YTD
  4. Russell 2000 +1.4% for the week and -8.8% YTD
  5. Nasdaq only +0.5% on for the week and -7.9% YTD
  6. Healthcare Stocks (XLV) down -2.0% for the week and -7.7% YTD


I’ll stop there for a second as it’s critical to contextualize that the “QE hope” was all that was – a day trade. Many US “growth” investors aren’t long Japanese stocks or Commodity squeezes – they’re long Nasdaq and Healthcare beta.


If you break down the US Equity Style Factors week-over-week:


  1. High Short Interest Stocks were +2.8% for the week and are -6.0% YTD
  2. Low-Growth Stocks were +3.1% for the week and are -5.1% YTD

*Mean Performance of Top Quartile vs. Bottom Quartile of SP500 Companies


In other words, not only did Energy Stocks (XLE) +4.4% lead the low-quality-short-squeeze on Friday, but the Top Quartile of SP500 Sales Growers sucked, closing only +0.7% on the week and only -7.5% YTD.


If you can’t be long the “growth” that everyone is already long, what was up last week that is A) actually up YTD and B) generating non-sucker alpha for the right reasons?


  1. Utilities (XLU) had another monster week, closing +3.7% to 4.9% YTD
  2. The Long Bond (TLT) capitalized on another -13 basis point drop in the 10yr Yield to get to +5.3% YTD
  3. Gold tacked on another +1.8% for the week, moving to +5.3% YTD


While US Dollar (UUP), The Long Bond (TLT), and Utilities (XLU) remain the Top 3 LONG Ideas in our Global Macro Themes Deck, I added Gold (GLD) to the long side (when it was red on the day) in Real-Time Alerts late last week.


On the other side of those Long Ideas, there’s a bounty of excellent short selling opportunities this morning in things like:


  1. Oil
  2. Copper
  3. CAT
  4. Canadian (and US) Banks
  5. SPY (SP500)


Oh yeah. You like that last one don’t you! SPY has been the sucker’s rally position for the aforementioned 7 months (when it locked in its all-time #Bubble high of 2130 in July of 2015).


Admittedly, being short SPY hasn’t been as sexy as short something like the Italian Stock Market (MIB Index DOWN another -2.0% last week to -12.9% YTD with #EuropeSlowing from its cycle peak), but it’s been pretty sexy.


From a sentiment perspective, looking at the CFTC non-commercial net SHORT position in the SP500 (Index + Emini):


  1. It got 54,976 LESS short last week to -137,478 net SHORT contracts
  2. That’s 50% less short than the peak short position established in SEP 2015 (at the market low)
  3. And that position registers a -0.5 z-score vs. its 1yr avg (the 6mth avg net SHORT position = -148, 831)


So, for starters, I’m thinking that the SP500 (SPY) has at least another 200 handles of intermediate-term TREND downside (another -10% from Friday’s marked-up close) before I take a knee again. Consensus on a US #Recession isn’t nearly Bearish Enough.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.91-2.02%

SPX 1 
YEN 119.01-121.54 
Oil (WTI) 27.52-34.66

Gold 1100-1132


Best of luck out there this week,



Keith R. McCullough
Chief Executive Officer


SPY Suckers - 02.01.16 Chart

Yen, Commodities and Yields

Client Talking Points


The Yen was smashed on the “negative yield” panic by the Japanese on Friday. Good for a 2-day Nikkei lift to lower-highs, but what’s next with the Nikkei down -7% year-to-date? All Japanese, European, and Chinese FX panic means is more #Deflation, in Dollars.


Dare we say layup short selling opportunities in things we don’t like (Oil and Copper specifically) on last week’s bounce – both are down -1.2-1.8% this morning. Gold (which we’re long in RTA, currently) is up +0.4% as #Deflation Risk = On.


Yields around the world crushed by Japan doing more of what hasn’t worked for decades – JGB 10YR = 0.04%! German 10YR = 0.31%, Swiss 10YR -0.31%. The U.S. Long Bond (TLT) remains our favorite Macro long idea alongside USD and Utilities (XLU).


*Tune into The Macro Show with Hedgeye CEO Keith McCullough live in the studio at 9:00AM ET - CLICK HERE

Asset Allocation


Top Long Ideas

Company Ticker Sector Duration

After a busy week of domestic data, you probably don’t need us to tell you that growth continues to slow. Despite the short-covering squeeze in energy stocks, Utilities (XLU) closed out January as the only sector in positive territory (+5%), other than Consumer Staples which eeked out a +0.5% gain. It was an awful start to the year for the S&P 500 (-5%). Don’t expect +10% of relative outperformance every month, but if you stuck with us on this trade, you’re in much better shape than most.


GIS remains one of our top Long ideas in the consumer staples space. As we have continued to say it boasts style factors that are ideal in turbulent times; high market cap, low beta and liquidity.


Recently, General Mills has been attacked by Chobani commercials, claiming that Yoplait yogurt contains the same ingredients used in pesticide. GIS filed a false advertising lawsuit against Chobani demanding that they stop showing that commercial because it could be detrimental to sales. GIS just got word that a federal judge has barred Chobani from continuing the ad campaign. This is a win for GIS, but it is unclear right now if there was any damage done to the brand. At this time we do not believe it had any serious impact on the company. We will keep you informed of any material information regarding this lawsuit as it moves forward.  


Long-Term Treasuries (TLT) continues to preserve capital against the slow-moving trainwreck in Junk Bonds (JNK). Week-over-week, 10-year bond yields crashed 13 basis points to 1.92%. That helped lift the best play on U.S. growth slowing (TLT) by 0.85% on the week as credit spreads continued to widen (JNK gained +0.76% on the week, underperforming TLT marginally on a relative basis).

Three for the Road


NEW VIDEO | From #Washington To Wall Street: What To Watch w/JT Taylor … cc @KeithMcCullough



What would life be if we had no courage to attempt anything?

Vincent van Gogh


Only 17 states require high school students to take a course in personal finance.

How Did You Do In January?

Takeaway: We've got 21 new reasons why it pays to be a RTA subscriber.

How Did You Do In January? - bull drinking 01.08.2016 normal 

We're not going out on a limb here stating that it was a rough month for most people. That's the reality. Stocks posted their worst January since 2009.

  • The S&P 500? Down -5.1%

  • Dow Industrials? Down -5.5%

  • Nasdaq? Down -7.9%


Not so for our Real-Time Alerts subscribers. In fact, this past month was one of the best (absolute and relative) months in RTA history.


As you can see below, Hedgeye Risk-Manager-In-Chief Keith McCullough more than managed global market volatility. He delivered a remarkable 21 of 23 winning signals in Real-Time Alerts.


Not a bad way to start one of the most difficult months in recent history.


Click to enlarge


How Did You Do In January? - z rta

Editor's Note: Hedgeye's Real-Time Alerts are risk management signals, not actual trades. For more information click here.


Here's a tweet posted on Friday. We've been seeing a lot of these... 


...And a recent email from another subscriber.

How Did You Do In January? - z sub ff


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Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.